Antero Resources - Q1 2024
April 25, 2024
Transcript
Operator (participant)
Greetings and welcome to the Antero Resources first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brendan Kruger, Vice President of Finance and Treasurer of Antero Resources and Chief Financial Officer of Antero Midstream. Thank you, you may begin.
Brendan Kruger (VP of Finance and Treasurer)
Good morning. Thank you for joining us for Antero's first quarter 2024 investor conference call. We'll spend a few minutes going through the financial and operating highlights, and then we'll open it up for Q&A. I would also like to direct you to the homepage of our website at www.anteroresources.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. Today's call may contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. Joining me on the call today are Paul Rady, Chairman, CEO, and President; Michael Kennedy, CFO; Dave Cannelongo, Senior Vice President of Liquids Marketing and Transportation; and Justin Fowler, Senior Vice President of Natural Gas Marketing. I will now turn the call over to Paul.
Paul Rady (Chairman, CEO and President)
Thank you, Brendan. Good morning, everyone. I'll start my comments on slide number three titled "Drilling and Completion Efficiencies." As I started my comments off, last quarter, the year 2023, was a transformational year for Antero for operational efficiency gains. This year, 2024, continues that trend. Starting with the chart on the top left-hand side of the slide, days per 10,000 lateral feet drilled averaged 5.4 days during the first quarter, down from 5.5 days in 2023. On the completion side, we averaged a quarterly record of 11.3 stages per day during the first quarter, an increase from the pace in 2023 of just under 11 stages per day. These operational improvements result in shorter cycle times, as shown on the bottom of the page. Our year-to-date cycle time per pad is currently trending ahead of last year's 2023 average.
There are many inputs that lead to these operational improvements as every single line item gets examined by our team. However, the most impactful change in 2024 has been improved efficiency in zipper swaps that allows us to move from well to well on a pad without having any true downtime. We estimate that this new completion technology will save more than an hour of pumping time each day and will result in further increases in completion times. Our operations also benefit from Antero Midstream's water infrastructure, providing industry-leading water deliverability rates for our completions. Avoiding the use of water trucks significantly reduces pad-site congestion that we would otherwise get from water and sand trucks accessing the pad, something that many of our peers have to contend with. Now, let's look at how these improvements led to our peer-leading capital efficiency.
The chart on slide 4 compares capital efficiency of the natural gas peer group. Put simply, this is the amount of capital required to achieve a maintenance level of production. Antero has the lowest capital per Mcfe of its peer group at just $0.55 per Mcfe. This is 40% below the peer average of $0.90 per Mcfe. Our best-in-class operating efficiency, combined with significant liquids exposure, led to positive free cash flow during the first quarter and is expected to generate free cash flow for the full year. Now, to touch on the current liquids and natural gas liquids, or NGL, fundamentals, I will turn it over to our Senior Vice President of Liquids Marketing and Transportation, Dave Cannelongo, for his comments.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Thanks, Paul. The start of 2024 demonstrated improved fundamentals for liquids. Ongoing geopolitical tension, particularly in the Middle East, has increased the risk premium on crude pricing in 2024 year-to-date. Internationally, the canal-related challenges seen last year have diminished, but global geopolitical tensions remain high. On the domestic front, record propane demand occurred simultaneously with significant January freeze-offs, drawing down storage and resulting in upward pressure on propane prices. Propane, as a percentage of WTI, has averaged 44% since the start of this year, compared with 36% in the fourth quarter of 2023. Exports have remained a driving force in the propane market and are showing strong year-over-year growth driven by growing global demand.
This year, China PDH buildout continues to progress with three new facilities placed in service in the first quarter and another three expected to start up there in the second quarter, totaling nearly 170,000 barrels per day of capacity additions in the first half of 2024. At the same time, propane exports have averaged 1.8 million barrels per day in 2024 year-to-date, an increase of 14% over the average in 2023. Notably, propane exports reported an all-time record high this week at over 2.3 million barrels per day. This export growth is depicted on slide five. The chart illustrates that the U.S. remains the most important source of waterborne export LPG to meet fast-growing global demand. As a reminder, Antero exports over 50% of our C3+ production, skewed heavily towards propane, directly out of the Marcus Hook terminal in Pennsylvania.
This year, we have elected to sell a greater portion of our waterborne barrels against international indices, as well as in the spot market, instead of entering into longer Mont Belvieu-linked term deals. In the event that Mont Belvieu propane prices disconnect from Europe and Asian pricing due to dock constraints or rising domestic storage levels, Antero is well-positioned to avoid additional Mont Belvieu exposure. The strength in international pricing has allowed us to increase our guidance for full-year 2024 C3+ differentials to a premium to Mont Belvieu pricing. As Paul just touched on, our first quarter results benefited from our significant exposure to liquids prices. Slide number six illustrates the approximately 125,000 barrels per day of C3+ NGLs, plus condensate that we produce. You can see the breakout of those products in the barrel on the left.
The barrel on the right-hand side of the slide separates the approximately 40,000 barrels per day of liquids that are closely linked to WTI oil prices. This includes isobutane, natural gasoline, and condensate. Butane markets have also been a strong tailwind to Antero's C3+ realizations, mainly due to implications of the Tier 3 gasoline specifications enacted in the U.S. Many U.S. refiners are unable to desulfurize gasoline down to 10 parts per million without also downgrading the octane of their motor gasoline. As a result, there is a strong demand for octane enhancement products made with butanes as feedstock. Isobutane has been particularly strong as it is used in the production of alkylate, which is a key octane enhancement product. Just this morning, you've seen isobutane trade at over a $0.40-per-gallon premium to normal butane.
In conclusion, Antero's NGL strategy, product diversification, and pricing are distinct when compared to other producers. Supportive fundamentals witnessed this past quarter illustrate the promising signs that are ahead. With that, I'll turn it over to our Senior Vice President of Natural Gas Marketing, Justin Fowler, to discuss the natural gas market.
Justin Fowler (SVP of Natural Gas Marketing)
Thanks, Dave. I'd like to open it up by turning to slide number seven titled "Not All Transport to the U.S. Gulf Coast is Equal." As a reminder, we sell substantially all of our natural gas out of basin, including approximately 75% to the LNG corridor. Our firm transportation portfolio provides us with direct exposure to growing LNG demand along the Gulf Coast and, importantly, into tier one pricing points in the vicinity of the major LNG facilities. With several new LNG facilities starting up over the next year, we expect to see a widening spread between sales points near Henry Hub and sales points outside of this premium market. The blue callout box highlights a recent quote from a research commodity team that emphasizes this view.
They believe sales points within 100 mi of Henry Hub could see prices comfortably above $5 per MMBTU, while sales points outside of that range could price at $3-$4 per MMBTU. Looking closely at this map, the yellow stars highlight Antero sales points and are located well within this 100-mile range to Henry Hub. These sales points were strategically selected beginning over 10 years ago in order to access the feeder lines at the doorstep of the LNG fairway. The chart on the top left-hand side of this slide highlights that Antero sells 75% of our gas at Henry Hub-linked prices, while our peers on average sell less than 15% of their natural gas into this premium market.
Looking ahead over the next two years as LNG export capacity increases by nearly 6 BCF per day, in addition to an expected rise in NYMEX pricing, we expect Antero sales points to be priced at even higher premiums than NYMEX as these LNG facilities compete for supply. An example of this is the pricing along the TGP 500L pool in the summer of 2025 and 2026. We've watched those summer premiums increase to $0.40 above Henry Hub on financial basis alone in anticipation of Venture Global's Plaquemines facility startup in the next few months. Just last year, those same implied summer premiums were only $0.03 above NYMEX. Venture Global received FERC approval this week to begin immediately introducing gas into the feeder Gator Express pipeline that brings supply from the TGP 500L pool to the Plaquemines LNG facility.
This initial feed gas requirement will potentially lead to higher demand and pricing in the TGP 500 region, as well as NYMEX Henry Hub prices this summer. According to market intelligence, the Tennessee Gas Pipeline Phase I Evangeline Pass project that feeds the Plaquemines LNG facility is expected to be online by July 1st, 2024, with capacity of 900 million per day. As a reminder, Antero owns 570 million per day of the firm delivery to the 500L pool, or 63% of the supply that will feed the phase I project capacity. Next, I would like to touch on the outlook for power burn demand. The chart on slide number eight depicts a third-party estimate for the increasing natural gas power demand as a result of AI data centers, crypto mining, and electric vehicles.
It projects nearly 8 BCF of incremental natural gas demand through 2030 in its base case scenario, or 14% growth per year. Next, turning to the chart on slide number nine, we illustrate the significant expected natural gas demand growth coming from LNG exports, Mexico exports, along with this increasing electric power generation need. Combined, these are expected to result in an increase in demand of 30 BCF by 2030, an increase of over 100% from these same demand sources today. It is in the early innings of increasing electrification demand. We believe there has been a structural shift toward reliable, clean, and affordable natural gas that will continue to increase power burn demand annually going forward. This demand growth, combined with rising LNG and Mexico exports, creates a significantly higher base demand level than we have ever experienced in the past.
We expect these fundamentals will provide support to natural gas prices and lead to periods of higher prices in the coming years. With that, I will turn it over to Mike Kennedy, Antero's CFO.
Michael Kennedy (CFO)
Thanks, Justin. I'd like to start with slide number 10 and our continued focus on reducing absolute debt. We plan to allocate future free cash flow to paying down the remainder of the credit facility balance and the higher coupon near-term notes we have outstanding. We'll then be in a position to return to our 50/50 strategy of 50% of free cash flow going to debt reduction and 50% going towards our share repurchase program. Turning to slide number 11, this slide compares 2024 free cash flow break-even levels. We highlighted our peer-leading break-even price shown on this slide during our last conference call. Our $2.27 break-even level compares to the average NYMEX natural gas price of $2.24 in the first quarter. Despite the low price, Antero generated an unhedged $10 million of free cash flow during the first quarter.
Our quarterly results benefited from low maintenance capital requirements and high exposure to liquids. As shown on this slide, results in the lowest unhedged free cash flow break-even price among our natural gas peers. I will conclude my comments today with slide number 12 titled "Antero Resources: The Unconstrained E&P Company." We believe the differentiated strategy that we built here at Antero is set up for success in today's macro backdrop. We have significant scale with production volumes of 3.4 BCFE a day and over 20 years of premium inventory. We have integrated upstream and midstream, which provides development reliability and long-term visibility into our program. This is critical in the development of the asset, as evidenced by recent transactions in the basin. We have the firm transportation portfolio that allows us to sell 75% of our production to the LNG fairway in the Gulf Coast.
Many of our peers lack firm transportation capacity, forcing them to sell gas at discounted prices well back of Henry Hub. The startup of the Plaquemines LNG terminal this summer is expected to lead to higher prices at our TGP 500 sales point, potentially leading to higher premiums to NYMEX Henry Hub. Lastly, we have the lowest reinvestment rate of our natural gas peer group. This peer-leading capital efficiency drives higher free cash flow conversion. Our low investment rate and high leverage to liquids was highlighted during the first quarter when we generated positive free cash flow despite being unhedged at a $2.24 NYMEX Henry Hub natural gas price. With that, I will now turn the call over to the operator for questions.
Operator (participant)
Thank you. Ladies and gentlemen, at this time, we'll begin conducting a question-and-answer session. If you'd like to ask your question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Arun Jayaram with J.P. Morgan. Please proceed with your question.
Arun Jayaram (Research Analyst)
Yeah, good morning. Maybe one for Justin. Justin, given the strong demand growth potential for gas through the end of the decade, I was wondering maybe if you could comment a little bit more on what you see as kind of advantage molecules from a margin perspective in this kind of environment. Obviously, historically, Appalachia has garnered a discount just given the lack of takeaway capacity in some of the gas-on-gas competition. But would rising demand in that area for data centers, etc., could that start to narrow some of the discounts that we've seen for Appalachia gas?
Justin Fowler (SVP of Natural Gas Marketing)
Morning, Arun. It's Justin. Yeah, so when we look at just the FT, 2 BCF down to the LNG corridor, we see those premiums continuing to gain value versus Henry Hub in the outer years. So we think that our delivery points to ANR Southeast Head Station, CGT Onshore, TGP 500L will continue to be very strong in terms of Appalachia versus AI data centers, etc., and the basis compressing and gaining value back toward Henry. Antero will have that ability to sell local production volumes as well if those prices increase seasonally or in different months of the year because we do, again, have a transport position of 75% to the Gulf. So we can measure that on variable costs, etc., and make that decision over time.
Arun Jayaram (Research Analyst)
Great. Thanks, Justin. Just a follow-up on the liquids marketing front. Dave, you mentioned that maybe you're exporting a little bit more than 50% or so of your C3+ molecules. What kind of flex do you have in the system? And if you saw a greater arbitrage, could you flex a higher mix in terms of export volumes? And maybe just give an update on what you're seeing in terms of shipping rates.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Yeah, Arun, we've done that now. This is Dave. We've done that flex, in particular, in what we call the shoulder season through the summer. So it'll be reported in our second and third quarter results where it shows the amount of volume that we export versus domestic. And those percentages go higher in the summer where we are at times well over 80% of our propane, in particular, is going to the docks. So we flex that already. I think there are some ways to take that higher if the market called for it, but we don't have a lot left in the domestic pool during those times of the year to begin with. And then on the freight rates, I mean, things have improved dramatically since where we were.
Late last year, you had all the concerns about the Panama Canal and how much that was going to deoptimize the global LPG shipping fleet. What actually happened, what we're seeing is more LPG ships getting through the Panama Canal since that announcement was made. I think first, the canal has been able to move more ships in general through the canal than they initially had forecasted when they announced those restrictions. So we've seen now freight rates collapse dramatically from where we were in the fourth quarter. That's ultimately allowing prices at the dock to be closer linked to the international price. We had a large buildout of VLGC vessels last year, over 40 VLGCs. We were kind of waiting for that to have its effect, and you're now seeing that today in the forward freight pricing.
Arun Jayaram (Research Analyst)
Great. Thanks a lot.
Operator (participant)
Our next question comes from the line of Subash Chandra, with Benchmark. Please proceed with your question.
Subash Chandra (Equity Research Analyst)
Yeah, thank you. Probably for Dave first. Dave, what do you think propane dock capacity is? And yeah, I mean, that 2.33 was a shocking number. Are we pretty close? And I guess those propane hedges you kind of added there show some caution through December. Maybe some updated commentary there.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Yeah, I think we are there on the dock capacity, Sebastian. The number, the 2.3, I mean, it is a bit of a head-scratcher. That can happen just kind of based on timings of when ships officially loaded. If they kind of fall a minute into the next week, that can certainly allow a number like that to happen. But we ultimately believe that's well above the kind of average rate that you could run across the U.S. docks. So it's somewhere in that 1.85-1.9 million barrels a day of propane because you still have butane that needs to move across those docks as well. So we'll see what they're able to hit this summer. And sometimes when it's hotter, it deoptimizes their refrigeration a bit. So I think we'll expect to see those docks highly utilized this summer.
But I think we're about at the levels of what we expect that they can do until the, call it, the second half of next year when there's some expansion projects on the way from the Gulf Coast midstream players. And then on the hedges, yeah, great question. We've talked about our concerns around propane pricing and kind of a decoupling in Mont Belvieu. If you saw inventory levels rise as a result of these docks being fully utilized. And so we just thought it was prudent to while we do export the vast majority of our propane, we still had some domestic exposure, and we just wanted to be conservative with that and take that risk off the table. If we saw things play out similar to what we saw last year where propane was down in the $0.65-per-gallon range, thought it was a wise move at this time.
Subash Chandra (Equity Research Analyst)
Yeah, but put some context around that. It's 10,000 barrels a day, which is only 15% of our total propane production because the vast majority gets international pricing.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
That's right.
Subash Chandra (Equity Research Analyst)
Right. Thank you for that. And Paul, I think on the zipper fracs, just curious, the adoption this year versus prior years, and what does it look like for the balance of the year, maybe % of well count, % of till, something like that? And sort of why it's come about now whereas maybe in other basins it's been more common for a while? Maybe there's a topography or things of that nature.
Paul Rady (Chairman, CEO and President)
Yeah, so of course, Subash, the zipper fracs have been around for quite a while. But earlier, maybe in a more primitive stage, there's been a lot of decoupling iron and rehooking it up for different wells. And so we've just found a way to be much more efficient on that. And with the flip of some switches and turning on and off some valves, we can flip the zipper frac to different wells as we're pumping. So it's become much more efficient, whereas in the past, it'd be at least an hour of downtime when we're changing zipper fracs.
Subash Chandra (Equity Research Analyst)
Okay. And in terms of sort of application here in the early months of 2024, how new is it versus, say, last year?
Paul Rady (Chairman, CEO and President)
I think it's a development in the last 6 months to 1 year where we've perfected it. It will continue on.
Subash Chandra (Equity Research Analyst)
Thank you, guys. Thanks, Paul. Thanks, guys.
Operator (participant)
Our next question comes from the line of Bert Donnes with Truist. Please proceed with your question.
Bert Donnes (Financial Analyst)
Hey, good morning, guys. Just wanted to ask around the data center demand question a little bit differently. You've continued to kind of avoid the temptation to go overseas with an LNG contract. Is there maybe a thought process that if we see a data center-driven boost, maybe there's no reason to leave the U.S.? And does that lead you to maybe trying to lock in a long-term contract in the U.S.?
Michael Kennedy (CFO)
Yeah, no, it wasn't around the data centers. It's just around we're the only company that can really get the molecule to the docks or to the LNG actual facilities. So we didn't have any need to enter into long-term contracts around that. We've already done our commitments on the pipeline in itself. And so we just wanted to stay floating and retain that optionality for us on what that pricing would look like when they'd have to compete for our gas. But with the data centers, that actually adds more, obviously, demand for that gas. So that competition just continues to grow.
Bert Donnes (Financial Analyst)
Okay. And no interest in maybe boosting legacy northeast volumes for a long-term contract or anything direct? You'd rather just say indirect for both kind of uplifts?
Michael Kennedy (CFO)
Yeah. Yeah, that's our philosophy. Stay in the Gulf Coast. I mean, an interesting thing that was highlighted in our prepared remarks, TGP, that 500 line we talked about this time last year would have set a $0.03 premium for next year. Now it's at $0.40. That's just going to continue to go higher. So as it gets closer and closer, you're going to see the premiums continue to go higher in the Gulf Coast, and that's where we sell our gas.
Bert Donnes (Financial Analyst)
Great. And then changing gears, on the Marcellus rates, on a per-foot basis, it was surprisingly strong quarter-over-quarter. They were shorter laterals. Is there maybe some logic going on that the shorter laterals are more economic and maybe 18,000-ft laterals are a little bit too long? Or is that just it's one data point, and you're not shifting gears?
Michael Kennedy (CFO)
Yeah, I'd say it's one data point. Generally, the longer laterals are more economic. You just spread the cost around a longer lateral foot. But we're so good at drilling and completing these that the longer laterals still provide the economics that it would suggest.
Bert Donnes (Financial Analyst)
Okay. So maybe on the tail end, there'll be a stronger later-dated production from the longer laterals?
Paul Rady (Chairman, CEO and President)
Yeah. I mean.
Bert Donnes (Financial Analyst)
Great.
Paul Rady (Chairman, CEO and President)
Yeah. I would say a shorter lateral will clean up more quickly. We'll dewater more quickly. And so it'll get to peak rate in a shorter period of time. But over the longer run, as Mike just said, the economics are so much better when we're going out to 16,000, 18,000, and even 20,000 feet. Those are really big wells. And so you wait a little longer until you get to peak rate, but it's worth it.
Bert Donnes (Financial Analyst)
Thanks for the answers, guys.
Operator (participant)
Our next question comes from the line of Neil Mehta with Goldman Sachs. Please proceed with your question.
Neil Mehta (Head of Americas Natural Resources Equity Research)
Good morning, team. I had a couple of questions on capital allocation. The first one on slide 10, you've done a great job of getting your debt down to this level. You talk about the next area to deploy free cash flow is to pay down your credit facility balance. I'd be curious on your perspective of how shareholder returns, specifically buybacks, fit into this equation. Given the strengthening of the balance sheet, when do you think you're at that inflection point to buyback stock?
Michael Kennedy (CFO)
Yeah, I said in the remarks, the first call on that free cash flow is to pay down the credit facility in that near-term maturity in 2026. So that's about $500 million. And then after that, we'll return to our 50/50 strategy of paying down debt plus buying back shares. It'll depend on commodity prices when we actually achieve those. But based on today's commodity prices, it'd be in the first half of next year.
Neil Mehta (Head of Americas Natural Resources Equity Research)
Helpful. Then we've seen a lot of consolidation across the E&P space, across the energy space broadly. You have a really deep inventory. I'd just love your perspective on how do you see Antero fitting within the M&A landscape? Is the right strategy an organic strategy?
Paul Rady (Chairman, CEO and President)
We do believe the right strategy is the organic strategy. You saw we were able to add, I believe, 19 locations in the first quarter. We had $26 million of land. That's highly economic compared to how much locations go for in the M&A landscape. And we continue to consolidate our areas of operation right where we're drilling these terrific wells and just continue to build out our position in the liquids portion of the Marcellus. So we believe that's the best way to add value and to continue to increase our 20-year inventory position.
Neil Mehta (Head of Americas Natural Resources Equity Research)
Perfect. Thanks, team.
Operator (participant)
Our next question comes from the line of Jacob Roberts with TPH. Please proceed with your question.
Jacob Roberts (Director of E&P Research)
Morning.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Morning, Jacob.
Jacob Roberts (Director of E&P Research)
Dave, I wanted to circle back to the liquids market. I apologize if you did hit on this in your answers. I may have missed it. I was hoping you could comment just on storage levels at the moment, specifically them being above the five-year, it appears, as well as the production coming out of PADD 3 and just where you see those playing out through the summer.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Yeah, good morning, Jacob. This is Dave. If you go back to the first quarter, we actually had with that polar vortex in January, we went from the top of the 5-year range to the 5-year average and then kind of continued along that trend until, call it, the last five or six weeks. We've had, I would say, some pretty unusual EIA data. It didn't really change at all for month, month and a half. And then we had a pretty significant change last week and then a below-expectation build this week. So we are back kind of in that between the 5-year range and the top of the range below last year but above that 5-year average. And we'll see what the inflection point looks like. How does that slope rise over the summer?
I think there's a lot of different forecasts out there on propane production this year. Hard to say exactly who's right on that. We do pay attention to the rate count in all the basins and watch that. And so that's, again, part of what drove our earlier comments and just taking that small amount of domestic Mont Belvieu propane exposure we had, doing some hedging there this year. But sorry, did I answer all of your question there, Jacob?
Jacob Roberts (Director of E&P Research)
Yeah, that's perfect. I appreciate it. Just the second question, can you remind us on the current expected timeline of the Martica payments, when those thresholds will be hit, and what that ultimately looks like once that threshold is met?
Michael Kennedy (CFO)
Yeah, as you rightly recall, they no longer participate in our wells. That ended March 31st, 2023. But there is kind of that runoff of the PDP base. That does revert back to us when they hit certain rates of return. And right now, we're forecasting that to be starting in 2026.
Jacob Roberts (Director of E&P Research)
Appreciate the time. Thank you, guys.
Michael Kennedy (CFO)
Thank you.
Operator (participant)
Our next question comes from the line of Kevin McCurdy with Pickering Energy Partners. Please proceed with your question.
Kevin McCurdy (Managing Director)
Hey, good morning. We appreciate all the detail you gave on the NGL marketing and the prepared remarks. My question is, as it relates to your realized prices, it looks like your C3+ prices were much better than the weekly average benchmark pricing. Just curious if there were some one-time items that benefited you in the first quarter versus the benchmark, or do you expect that premium to continue?
Michael Kennedy (CFO)
Yeah, no, there weren't any one-time items. We've really switched this year to more international exposure, better contracts, not linked to Mont Belvieu. So we're still kind of working through those relationships. Obviously, the international pricing's been better than domestic pricing. And as that continues, we see higher and higher NGL realizations. You saw that in our increased guidance, increased it by $1. So as we continue to kind of watch the actuals versus kind of our forecast, we'll get a little more dialed in on that. But it's really just due to us switching to internationally linked liquids contracts versus domestically linked in prior years.
Kevin McCurdy (Managing Director)
Great. And as a follow-up, we've heard from other gas companies that are changing their activity plans given kind of the weak spot prices. What would make you consider pushing out wells till later in the year? Or are you overall happy with the equivalent price you receive?
Michael Kennedy (CFO)
Yeah, it's really dominated by liquids pricing. I mentioned on prior calls, we do have one pad. I mean, we're only running two rigs and one completion crew. We do have one pad in the capital program. That's a spot pad for the third quarter of this year. And that's one that's still to be determined. If it was based on current month prices today, that was one that could potentially be deferred. And then that would put you at the low end of the capital guidance range. The other pads, it's just one completion line. So running that with our two rigs is very efficient. And it's very much 1,275-1,300 BTU gas, so very high in the liquids content. So that's what drives the economics. I think in the first quarter of our revenue, 55% was liquids and only 45% was gas.
You can see how much the liquids prices really influence the economics of these wells.
Kevin McCurdy (Managing Director)
Thank you. Appreciate the answers.
Michael Kennedy (CFO)
Thank you.
Operator (participant)
Our next question comes from the line of Betty Jiang with Barclays. Please proceed with your question.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Hi, Betty.
Betty Jiang (Senior Equity Research Analyst)
Hi, good morning. I was wondering if you.
Operator (participant)
Betty, your line is going in and out.
Betty Jiang (Senior Equity Research Analyst)
Oh, all right. Sorry.
Operator (participant)
There we go.
Betty Jiang (Senior Equity Research Analyst)
All right. Can you provide a bit more detail on the startup of the Plaquemines LNG? Do we need to see the first cargo loading or, say, mechanical startup before seeing any material feed gas demand? You mentioned that the TGP line, the 500 line, has capacity of 900 MMcf. Just any view on how quickly we could see those feed gas demand reach those levels?
Justin Fowler (SVP of Natural Gas Marketing)
Hi, Betty. It's Justin. Yeah, so when we look at the data that we have so far on Plaquemines, you're correct. The Tennessee project, the Evangeline Pass Project, should start up July 1, capacity of 900. The marketing analysts will be tracking the vessels that will be parked waiting to load. So that will be a data point to watch, the vessels that are showing up to the facility as we approach July. And then we'll see that gas through the nominations into that new Evangeline Pass Project. So in theory, once we get to July, the physical gas is flowing. We'll start getting a better gauge of how quickly the liquefaction trains are ramping to at least "mechanical completion.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Got it. No, that's helpful. Just following up on pricing, clearly, your guys' view is that the current future strip prices is not reflecting the dynamic around that hub. Why do you think that's the case? And what will be the catalyst to drive that relative hub pricing higher?
Justin Fowler (SVP of Natural Gas Marketing)
You're referring to the Henry Hub pricing?
Betty Jiang (Senior Equity Research Analyst)
The TGP 500 line pricing relative to Henry Hub.
Justin Fowler (SVP of Natural Gas Marketing)
Yeah, Betty, we are seeing the price reaction at 500L in the forward markets. And that's just looking at financial basis alone. So looking at financial basis alone, in the summers, on Cal 2025 and Cal 2026, they're already showing +$0.40. That is, again, just financial. So those points will command a physical premium, which will start to develop as we get closer to delivery. But there will be a physical premium component as well. So if it were a dime to 20 cents, let's say you're now at $0.60 or $0.70 over Henry Hub as that physical gas starts to price closer to delivery.
Betty Jiang (Senior Equity Research Analyst)
Got it. And is there a physical gas premium today for that gas?
Justin Fowler (SVP of Natural Gas Marketing)
Today, it varies, Betty. We've seen different premiums. Last summer, we were seeing very high premiums in the summer months on the physical side. And that's because there still is power generation requirements in the Southeast when the temperatures get hot and AC load starts to increase. So yes, we have seen those premiums in the past, but it can trade flat to plus.
Betty Jiang (Senior Equity Research Analyst)
Got it. That's helpful. Thank you. If I could throw in a question just on the certified gas side, it's good to see that you guys increased the certified gas coverage under Project Canary. Do you expect all of your production to get certified at some point? And also, kudos to you guys on the emission intensity, on the production that's really low relative to your peers. Is there much more room you can do to reduce emissions organically from here?
Justin Fowler (SVP of Natural Gas Marketing)
Yes. So on your first question on Project Canary, we do see that going across all of our field. We're up to 2 BCF a day. So that's about two-thirds, maybe around 50% of the field on a gross basis. So over time, we do see continuing to build that out across our entire field. On the emissions, we're getting close to being as low as we can. We've eliminated probably about 85% of all our pneumatic devices and have done all the valve control work that is necessary to limit the emissions from there. So we're getting as close as we can. We ultimately think we'll get down into that in 2025, into that 225,000-250,000 metric tons level that we need to offset. And that's why you saw us commence with our project to offset those emissions through our stovetop cookstoves and Ghana initiative.
Betty Jiang (Senior Equity Research Analyst)
Great. Yeah, no, I like the project. Thank you very much.
Justin Fowler (SVP of Natural Gas Marketing)
Thank you.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Thank you, Betty.
Operator (participant)
Our next question comes from the line of Subash Chandra with Benchmark. Please proceed with your question.
Subash Chandra (Equity Research Analyst)
Yeah, thanks. Back to Plaquemines and TGP 500. So obviously, the forwards are showing a scarcity of gas, beginning with full ramp in the LNG facility. How do you see that being addressed, and over what timeframe? Is there absolutely no chance of having incremental capacity there over the next couple of several years that that premium shows in the strips?
Justin Fowler (SVP of Natural Gas Marketing)
There could be other volumes drawn to that area just depending on the basis spreads and the premiums. That corridor has a lot of pipes that traverse west to east, filling that Southeast power generation load, etc. So I think, to Mike's point earlier, it just depends on the competition of need seasonally and monthly. If global spreads and global pricing are spiking, then you would assume that the competition will increase. There is a finite amount of gas that can get into those areas. So Antero, when we started picking up that capacity years ago or at least putting the contracts together prior to in-service date, we knew at the time that to get physical gas down the 500 leg, it is a challenge to get volume over there just with the market pull in the Southeast.
So then you add the new liquefaction facility of potentially 3.4-3.8 BCF a day. It just leads to that competition that we expect and volatility and then price premiums.
Subash Chandra (Equity Research Analyst)
Okay, got it. Okay, thank you.
Operator (participant)
No further questions in the queue. I'd like to hand it back to management for closing remarks.
Brendan Kruger (VP of Finance and Treasurer)
Yeah, thank you for joining us on today's call. Please reach out with any further questions. Thanks.
Operator (participant)
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful day.